Monday, May 4, 2015

The best counties to raise high achieving, low earning children

This topic was suggested by James Johndrow and this blog is co-written with him. 

Today I came across this beautiful, interactive map on the New York Times that tells you how much financial advantage is gained by spending your childhood in each county in the US. This map goes so far as to report expected gains (or losses) by each county at each of several parental income quantiles. Always a sucker for beautiful, interactive maps, I dove right in and had a look at the county where I grew up:  Placer County, CA.

From this map, kids who grow up in households with income at the 25th percentile, on average should expect to earn about $2,640 more than kids from similarly earning families in an "average" town. (Yes! High air first pump for Placer County and income mobility and all of that.) If you toggle the percentile button to 75% to look at the same statistic for kids from higher earning families, the pictures changes entirely. At age 26, kids from families with earnings in the 75th percentile earn about $2,500 less than if they'd grown up on an "average" town. 

This got me thinking... what was I doing when I was 26? Well, I had just finished my PhD the year before. I had taken a postdoc in Rio de Janeiro, Brazil and, thoroughly burned out, I had promptly quit. So, at age 26 I was earning approximately zero actual dollars per year but was gaining invaluable life experience (or something). Sorry, Placer County. I think I brought that average down. What was my best friend doing? She was still in medical school. Other friends were just finishing law school. 

My guess as to what is going on at the higher percentiles is that a non-negligible percentage of children from high earning families are still in some form of higher education at age 26. One way to see if this is a potential culprit is to actually read the paper . I did that (it was painful) and I don't think they are controlling for enrollment in higher education in these estimates. One thing the authors did note is that children from certain areas tend to marry later in life, and as a result family income at 26 will be lower. So that may also be part of what's going on here. But the "still in school" hypothesis was more interesting to me, so naturally I started digging into details.

A fun way to investigate this is to propose several places that have an "academic culture"-- places  where the higher income people are likely to be professors or physicians. Going out on a limb, if it's true that those people's kids are more likely to still be in school at age 26, we should see negative effects at the higher quantiles at age 26 in those places. We looked at Durham Co, NC (Duke University), Orange Co, NC (UNC Chapel Hill), Tompkins Co, NY (Cornell), and Montgomery Co, VA (Virginia Tech). These are places that we have personal experience with and know fit those criteria. In each case, we found that this map estimates a big economic disadvantage at age 26 to having grown up in these places if your household is in the upper quantiles. The same was true of Washtenau county, MI (University of Michigan), Hampshire county, MA (UMass, Amherst, Hampshire, Smith, Mount Holyoke), Missoula county, MT (University of Montana), Santa Cruz county, CA (UC Santa Cruz), and Los Alamos county, NM (Los Alamos National Labs). 

Another interesting example is Westchester Co, NY. Going entirely on stereotypes here, I'd expect that many of the high earners there work in finance, a field that historically hasn't required graduate school. And, if we again assume that apples don't fall far from trees and kids there are likely to go into the same field, that would explain the huge economic advantage at age 26 for those who grew up in high income families in Westchester Co. They're earning a lot and they aren't still in school. Here's a screenshot of the map for the New York area:

Another interesting thing you can see on this same map is how "bad" Manhattan apparently is for children in families even in the top one percent of income (I think about $500,000/year but don't quote me on that). Maybe children of wealthy families who grew up in New York are more likely to be in grad school or traveling or something at 26. But that isn't necessarily "bad," which is how the graphic depicts it.

Similar economic disadvantage apparently exists for well-off kids in some other places that, while not dominated by colleges, have a sort of academic or artsy reputation. Here I'm thinking of Travis county, TX (UT but also "keep Austin weird"), Marin county, CA (hippies and artists and well to do anti-vaxxers), and, just across the bay, San Francisco county, CA (need I label this place other than "awesome"?). And a final, bizarre example is Hamilton county, IN, which as far as I can tell doesn't fit the "artsy" or "nerdy" bucket, but was apparently named "America's best place to raise a family" in 2008 by (I got this from Wikipedia), but is apparently "very bad" for children in upper income families. By the way, you can check out a bunch of screenshots of the maps for these places below.  

These examples are consistent with our hypothesis that, in some cases, the decreased "expected income" is a function of the fact that many people who end up earning higher amounts of money are still in school at age 26. So, while I don't think this map is technically wrong, I think it is misleading. Without carefully thinking about it, it would imply that the more academically focused counties cause kids who grow up there to have lower earnings generally. While there are the rogue wunderkind techies who make their millions by the time they are 26 without higher education, that certainly is the exception rather than the rule.  For many people who are going to end up at the upper ends of the income distribution, they are still in school at age 26.... much like the senior investigators of this project likely were given that they hold PhDs.